BENGALURU – Nike has trimmed its annual sales forecast, blaming cautious consumer spending, a weaker online business and more promotions.
The sportswear company said it plans to cut supplies of key product lines to manage costs, sending its shares down 11 per cent.
The company said on Dec 21 it was seeking US$2 billion (S$2.65 billion) in savings over the next three years through steps including tightening the supply of some products, improving its supply chain, reducing management layers and increasing the use of automation.
Nike’s wholesale business has been under persistent pressure as retailers place fewer orders amid choppy demand.
The weakness is also showing up in online sales, forcing the company to boost promotions as shoppers dwindle.
Sales in China have also slowed as the economy has stumbled.
“We are seeing indications of more cautious consumer behaviour around the world,” Nike’s finance chief Matthew Friend said on a post-earnings call.
Nike projected full fiscal year revenue to be up about 1 per cent, down from its prior forecast of mid-single-digit percentage growth.
Analysts had expected a 3.8 per cent increase, according to London Stock Exchange Group data.
Morningstar senior equity analyst David Swartz said: “Nike’s talking about reducing the number of products… perhaps the company feels there are too many products that are not high-margin and not really generating significant sales.”
But Nike said it was also launching fresher styles to attract consumers, building on the success of recent releases like the Sabrina 1, LeBron 21 and Tatum 1 basketball shoes.
Mr Friend said: “In an environment like this when the consumer is under pressure and the promotional activity is higher… it’s newness and innovation which causes the consumer to act… that’s what’s going to pull us through a promotional marketplace.”
Nike expects upcoming releases in the GT Cut, Book 1 and Kobe lines planned over the next three months to drive sales.
The company did not elaborate on which product franchises it plans to cut supplies of, but said its iconic lines of sneakers such as Air Force 1, Dunk and Court were all performing well.
The company posted total revenue of US$13.39 billion in the fiscal second quarter ended Nov 30, missing estimates of US$13.43 billion.
Per-share earnings of US$1.03 topped estimates of 85 US cents, thanks to lower freight costs and inventories.
Nike shares have risen less than 5 per cent in 2023, compared with a 24 per cent rally in the S&P 500 index and a 52.5 per cent gain for rival Adidas. REUTERS
